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Gail Wilensky is a senior fellow at Project HOPE. She was previously the administrator of the Health Care Financing Administration (now the CMS) and chair of Medicare Payment Advisory Commission.
Gail Wilensky

Taking on Medicare to solve budget woes remains political challenge

By Gail Wilensky
Posted: February 21, 2011 - 12:01 am ET

Although the new session of Congress has barely begun and President Barack Obama has only just released his budget for fiscal 2012, already as much attention is being given to positions being developed for 2012 as for legislation being readied for the current session. In large part, that should come as no surprise given a new House of Representatives whose majority was elected on promises to roll back government spending to 2008 levels as well as repealing the Patient Protection and Affordable Care Act.

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Of course, with a Democrat-controlled Senate and a Democratic president, both of these remain highly unlikely in the current Congress. Thus the focus on the next Congress and the presidential election comes even sooner than normal.

The spending bill

The House of Representatives is currently debating spending amendments to the $1.2 trillion bill that will fund the government for the rest of this current fiscal year. By looking at the amendments being offered, some of the differences in priorities between the parties are clearly evident.

The Republicans have proposed reducing spending in the bill by approximately $60 billion. Reducing spending is clearly a major priority for the House Republicans whereas the Democrats have questioned whether the reductions will imperil job creation and with it, the recovery. Given that we are already five months into fiscal 2011, $60 billion is not a small reduction although smaller than the most aggressive conservative Republicans and tea party representatives would like. The reductions are primarily in domestic areas like police and fire protection and low-income heating subsidies as well as foreign aid, like TB programs in Africa. A few cuts are more ideologically driven—like the reductions in spending for Planned Parenthood, but most reflect reductions where a majority of support could be crafted.

It is unclear what will happen when the House bill reaches the Senate—and less clear yet, what will happen if and when this bill or a similar bill reaches the White House. All of this uncertainty would not be as urgent if the government were not in a position where it will run out of spending authority after March 4 unless the funding bill is signed into law or a continuing resolution is passed that allows the government to continue spending at current levels. The time crunch becomes even clearer with the pledge made by House Speaker John Boehner that he will not support a continuing resolution that doesn't contain reduced spending—suggesting a potential redo of the confrontation and subsequent government shutdown that occurred in 1995.

By most accounts, the 1995 shutdown of government did not play out well politically for Republicans. But it is not clear that the same would be true here. Unlike in 1995, where Republicans held both houses of Congress, Republicans now hold only the House with Democrats controlling both the Senate and the White House. Whether the public would assign political blame as it did in 1995 is therefore not obvious.

Physician payments … yet again

The physician fee schedule under Medicare has been stabilized for 2011 but the current “fix” runs out at the end of the 2011. President Obama has proposed further stabilizing the physician fee schedule for an additional two years in his 2012 budget but already questions have been raised about the seriousness of the funding sources for the more than $50 billion this would cost.

While it must be very frustrating for the physicians who care for Medicare beneficiaries not to know whether their fees will at least continue at current levels rather than be slashed by 20% or more, it is unlikely that we will see more than short-term fixes for at least the near-term. First, because fixes that extend more than a year are difficult to credibly finance and, more importantly, because there is no agreement as of yet about the reimbursement system that should take its place. It would be more reassuring if there were ongoing pilots testing new physician reimbursement methods but as of yet, that is not occurring—despite the widespread concerns that fee-for-service reimbursement rewards volume rather than value.

The elephant in the room

The amendments by House Republicans to the spending bill and the president's 2012 proposed budget have both been criticized for focusing only on discretionary spending when there is widespread agreement that the most serious challenges to fiscal solvency are related to entitlement spending—most especially Medicare. House Republicans have promised to release details about what they will be proposing to rein in Medicare spending some time over the next few months—a process that if done unilaterally is fraught with political danger.

More recently, news has been reported about a small bipartisan group of senators who are meeting to craft legislation that would trigger new taxes and spending cuts if Congress failed to meet pre-specified spending goals and other targets aimed at reducing the deficit. Their plan focuses on four areas of deficit reduction: reform of the tax code, cuts in discretionary spending, changes to healthcare entitlements and changes to Social Security. The spending targets follow proposals from the president's deficit commission (which the president himself has seemed to ignore) and would go into effect if the targets in the various areas were not met.

Some House Republicans are already reported to be concerned abut whether these efforts would make them politically vulnerable and several Senate Democrats have already taken Social Security reductions or other changes in benefits off the table before the discussions have even started.

There may be widespread agreement that we will never resolve our deficit problems without taking on entitlement spending but doing so will clearly remain a political challenge to both parties. Nothing that is happening currently suggests that this is likely to change anytime soon.

Gail Wilensky is a senior fellow at Project HOPE. She was previously the administrator of the Health Care Financing Administration (now the CMS) and chair of Medicare Payment Advisory Commission.

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